Electrification and Circularity: The Smart Investment for Europe’s Industry

When the European Commission unveiled its Industrial Carbon Management Strategy in 2024, it presented carbon capture as an important building block to industrial decarbonisation. The promise is simple and seductive: keep a large part of our carbon-intensive industries running much as they are, just add a giant vacuum cleaner at the end of the smokestack.

This promise has remained elusive for at least three decades. Carbon capture has almost exclusively been used for fossil gas and oil extraction for which a business case exists. In other sectors it simply hasn’t delivered. This has led the EU power sector, for instance, to conclude that renewables are a cheaper and more profitable option, as shown by the 35:1 investment ratio of renewable generation to fossil fuel power achieved by early 2025. 

However, a recent wave of renewed interest, including in industrial applications, has crashed onto the US, UK and Canada and also the EU – hence the new EU Strategy. The Commission aims at 280 million tonnes of CO2 captured annually in 2040, and a whopping 450 million tonnes in 2050.

A risky and expensive bet

There is only one problem. Pursuing carbon capture over its alternatives is wildly expensive, and it distracts Europe from cheaper, faster and more reliable solutions that are already within reach. At a time when European industry is under pressure from high energy prices and global competition, Europe shouldn’t bet on technologies that are uncompetitive and plants that risk becoming stranded assets. 

The fact is that capturing carbon, compressing it, transporting it across borders and storing it safely for centuries is not cheap today. And as researchers at the University of Oxford indicate, there is little evidence it ever will be.

This is because, contrary to electrotech that becomes cheaper with scale, there is no learning curve in any part of the CCS process, whether capture, transport or storage, to slash costs over time. 

Still, we see industry players and local governments pouring giant sums of money into plant retrofits and infrastructure with public subsidies. According to estimates of the Institute for Energy Economics and Financial Analysis (IEEFA), Europe’s current project pipeline could cost as much as €520 billion and require 140 billion € of government support. 

That’s a lot of money for technologies that capture on average only 49% of emissions, or in the case of a steel plant in the UAE, just 17%. And this is before even taking into account up and downstream emissions, the emissions of other hazardous pollutants, or discussing the costs for long-term monitoring, liability or leakage risks decades down the line.   

With that in mind, it’s in our best interest to explore all other options that will provide more bang for our buck. 

Luckily, the alternatives are right in front of us

Carbon capture has often been portrayed as a necessary option for so-called hard-to-abate sectors. That outdated view now belongs to the garbage bin of history. 

Sectors like steel and cement (and chemicals to a certain extent) can now be considered as fast-to-abate as a result of a wide range of rapid technological advances. And they open up commercial opportunities for innovators to boot. 

As always, we should first look at efficiency. The cleanest tonne of CO₂ is the one never emitted. Industrial efficiency measures – better process control, waste heat recovery, smarter design – reduce emissions while lowering energy bills. They pay for themselves. Carbon capture, by contrast, adds an “energy penalty”: capturing carbon requires significant additional energy, increasing fuel use rather than reducing it. 

Second, we should prioritize circularity. Material Economics’ landmark study shows that the EU can cut emissions by 56% by 2050 in steel, cement, plastics and aluminium sectors. Looking at cement in more detail, we see that existing and commercially available solutions such as clinker reduction and substitution as well as recycling of Portland cement can be scaled up fast. If the right performance standards are in place, this can bring down the cement industry’s footprint by at least 50% in a much faster and cost-efficient way.

In the case of steel, a combination of recycling steel in electric arc furnaces and direct reduced iron reactors with renewable hydrogen, together with material and energy efficiency strategies can bring down emissions to zero.

Compare that to Agora Industrie’s calculations for retrofits of blast furnace steel mills. Assuming a 90% carbon capture rate at the main emission sources, only 73% of the total emissions of the steel plant can be captured. Targeting the rest would be prohibitively expensive.

A third main course of action is direct electrification. This is where a real transformation potential lies, considering that fossil fuels still cover 75% of industrial process heating. According to Fraunhofer ISI’s study for Agora Industrie, electric furnaces, heat pumps and other electric processes are already available and can cover about 60% of industrial heat demand today. Technologies for high temperature heat, that will be available by 2035, can boost that to 90% of total demand. 

Industrial policy is about making strategic choices

An excessive focus on carbon capture risks locking Europe into continued fossil fuel use for decades. It makes Europe geopolitically vulnerable and harms European competitiveness. 

On the contrary, efficiency, circularity and electrification eliminate exposure to these risks. They create jobs across Europe, not just around a handful of storage sites. They will increasingly lower operating costs for industry, in contrast to adding a permanent carbon capture surcharge. If the goal is to safeguard European industry, this is where the smart money goes.

There may be niche applications where no better option exists. But making carbon capture the centerpiece of Europe’s industrial action is a costly distraction from solutions that work better, faster and cheaper.

Europe does not need a climate moonshot built on pipedreams and promises. It needs a clear-eyed industrial strategy grounded in common sense: use less energy, waste fewer materials and reuse them more, electrify wherever possible. That is how we cut emissions, protect taxpayers and give European industry a future worth investing in.